Emerging Markets
Emerging markets encompass regions with significantly diverging fundamentals and a broad range of credit challenges—from persistent inflation and tightening financing conditions to sluggish domestic demand and geopolitical tensions.
How We Rate Emerging And Frontier Markets
Emerging and frontier markets are strategically positioned to drive global economic growth through the expansion of their domestic markets.
Emerging and frontier markets will play a crucial role in shaping the global economy and driving growth, contributing approximately 65% of global economic growth by 2035. Frontier markets will play a prominent role in this growth due to their favorable demographics—but face significant challenges from persistently high inflation and political uncertainty.
Monthly Highlights
Tariffs Will Continue Testing Resilience
We still expect central banks in the largest emerging markets (EM) to keep easing in the coming months, though many of them—especially in Asia—are nearing the end of their cycles. However, a more cautious Federal Reserve could constrain EMs' easing further, as reflected in markets' recent repricing.
The dollar's descent has lost steam recently. A weaker dollar has benefitted issuers in EMs in 2025, especially those with a large share of unhedged debt denominated in U.S dollar. That said, higher tariff-related inflation in the U.S. could reverse the Fed's monetary easing cycle and weaken financing conditions for EMs.
The EU's Carbon Border Adjustment Mechanism (CBAM) will start imposing carbon pricing from 2026 on about $120 billion worth of goods, including aluminum, cement, steel and fertilizers. Higher-emission producers in EMs could lose competitiveness, while lower-emission exporters such as Mozambique, Ukraine, Morocco, China, and Brazil may gain market share.
EM benchmark yields continued their descent in October, especially in Nigeria and Egypt. Corporate spreads followed a bumpy pattern, widening on U.S. policy uncertainty and U.S. regional bank sell-off through the first half of the month, particularly among speculative-grade issuers, and then compressing again. Market activity slowed across regions, with financial issuance taking a breather.
Latin America
Credit Trends
November 26, 2025
Emerging Market Risky Credits: Eyes On Latin America
The number of emerging market issuers rated 'CCC+' and lower decreased to eight as of October 2025 from 10 in April. The percentage of issuers with a negative outlook or on CreditWatch negative increased to 50% from 25% over the same period.
Brazilian issuers accounted for nearly all defaults in the risky credit cohort year to date, with the total default count decreasing to seven from eight over the same period last year.
No company in the risky credit cohort issued debt over the past three months because of rising borrowing costs and the manageable maturity wall.
The maturity wall will peak in 2028, with most upcoming debt located in Latin America and concentrated in the telecommunications and chemicals, packaging and environmental services (CP&ES) sectors.
EM EMEA
24 September 2025
Islamic Finance Outlook, 2026 Edition
Strong banking and sukuk industry performance led to 10.6% growth for the global Islamic finance industry in 2024, with total sukuk outstanding surpassing $1 trillion for the first time.
In 2025, amid increased uncertainty, we expect continued positive growth in the industry, but the sukuk market’s regulatory landscape is still evolving with the possible adoption of Sharia Standard 62.
We expect $10 billion-$12 billion in sustainable issuance in 2025 and continue to think it could drive future growth, although short-term performance might be lower than our initial expectations.
EM Asia-Pacific
Emerging Markets
7 May 2025
Vietnam And India Are Key Markets To Watch Outside Of China
Smartphones and PCs are the most exposed to U.S. tariff risk among tech companies that produce in Asia.
Frontier Markets
Sovereigns
27 October 2025
Frontier Markets Quarterly Highlights: Tariffs Meet Disinflation Amid Supportive Financing Conditions
Frontier markets (FMs) face dual headwinds: rising U.S. tariffs and a projected decline in aid flows in 2025. While most FMs have limited direct tariff exposure, exporters like Cambodia and Nicaragua (U.S. exports greater than 20% of GDP) and aid-dependent sub-Saharan African countries are especially vulnerable.
Soft oil prices and falling international food prices are helping disinflation, especially in EMEA, where cereals and sugar account for a large part of total food imports. The ongoing rally in gold and several precious and industrial metals prices continues to support some metals exporters, primarily in sub-Saharan Africa.
Financing conditions remain supportive, although policy rates have mostly been on hold. Current FM sovereign index yields fell to 10.4% and associated spreads narrowed to multiyear lows, indicating credit-risk compression. Looking closer at 10-year benchmark rates over the last year highlights the strongest reduction in Ghana (by -1,214 bps) and Zambia (-689 bps); Ecuador and Bolivia's return continue to outperform the EM benchmark.
Last quarter saw positive momentum in FM sovereign ratings. Upgrades of Pakistan, Kenya, Sri Lanka, and Lebanon outweighed a single downgrade of Senegal. Our non-sovereign FM portfolio remains stable, with 69% of ratings on a stable outlook.